A Maine thrift that once faced closure by federal regulators because a sister thrift failed is hoping to raise $10 million in capital to repay a unique debt to the Federal Deposit Insurance Corp.
Portland-based First Coastal Corp. has another year to repay a $9 million promissory note from January 1995, with about $700,000 in interest. As security the thrift had pledged to the FDIC all of the common stock of its subsidiary, Coastal Savings Bank.
The note stemmed from the thrift's agreement with regulators to avoid being socked with a $90 million bill from the 1991 failure of Suffield Bank in Connecticut. After that failure Suffield's holding company, which had bought Coastal Savings in 1987, changed its own name to First Coastal Corp.
Federal law allows the FDIC to impose a cross-guarantee debt on healthy companies to force them to pay for losses on commonly controlled institutions.
The agency is even allowed to seize such healthy institutions. That happened to Maine National Bank, which was closed by the FDIC in 1991 after its parent, Bank of New England, failed.
And it would have happened to $145 million-asset First Coastal in 1991 except for the intervention of Maine's superintendent of banking, H. Donald DeMatteis, who persuaded the FDIC to keep the thrift open and negotiate the unprecedented settlement.
That settlement called for the FDIC to waive the cross-guarantee claim in exchange for First Coastal's $9 million promissory note, with all payments deferred until the maturity date.
For the past year, thrift officials have been working with First Albany Corp. to examine multiple options to raise the money, including a sale of the thrift, said Greg Caswell, president and chief executive. He declined to comment further on the plan.
But Mr. DeMatteis said the current plan is the only one the thrift discussed with regulators.
"The regulators feel that a recapitalization plan is feasible," Mr. DeMatteis said. "We may fine-tune and tinker with the plan, but we believe the plan that they are contemplating now is a viable plan for the institution."
Under the announced plan, which still requires regulatory approval, First Coastal would raise about $3 million to $4 million through a stock offering, including a rights offering to current stockholders. Officials plan to get the rest from a loan and through a dividend from the thrift to the holding company. No other details were released.
The dividend in particular must still be approved by state and federal regulators, but other sources familiar with the situation say that's likely if the two offerings are successful.